As a business owner, we understand the importance of every dollar.. It goes without saying that if you’re not clear as to where your finances are at the end of the month, it will be difficult for your business to survive until the end of the year.
Of course, DIY accounting software can help you monitor costs for yourself, but they are not as effective as hiring a good accountant. Plus, when you hire someone, you will get benefits that go beyond just crunching numbers.
If you find a good accountant, you can potentially have a financial partner for your company for years to come who has knowledge of how to keep the company running with maximized profits.
The question is, how do you hire an accountant? Here’s a guide!
Who is an accountant?
An accountant is someone who examines your company’s finances and then prepares financial reports based on those. Among the many other responsibilities, their job involves making sure that your financial data is correct and that your taxes are paid on time. Some might even offer bookkeeping services.
Other things that your accountant can do for you include:
- Recognizing problems like customers not paying on time, disappearing inventory, and increased production cost
- Maintaining the cash flow at acceptable levels
- Identifying the tax deductions that your company is entitled to
- Putting together financial reports to get investments and loans
- Quickly preparing tax returns
- Pointing out potential growth areas by evaluating types of business financing, cash flow patterns, inventory management, and pricing
Why do you need to hire an accountant?
While you might be tempted to handle all money-related issues yourself, you might not always have time to deal with all the problems while managing business operations. Thus, it is better to hire an accountant. Plus, an accountant can also help you with the following:
- Devise a business plan
A good accountant will be familiar with not only your business environment but also your financial statements and tax situation. Thus, they can put together information and details from all these and come up with a personal financial as well as a business plan.
- Advise you on matters you are not an expert in
An accountant can also offer you advice on different matters, such as insurance. For instance, he can help you determine if you need a business interruption insurance or if you will benefit from leasing a second site. Similarly, he can advise you on expansion, such as how additional capacity will affect operating costs. With an accountant by your side, you can get a whole new level of insight that can be highly beneficial for your business.
- Help you with record-keeping and accounting
Both accounting and record-keeping make up the basics of accounting. While business owners can manage day-to-day records, an accountant helps to set up accounting and bookkeeping systems and demonstrates how to use them. With a good system in place, you can easily modify prices and evaluate the profits. Such a system will also allow you to track your company’s budget, monitor expenses, and spot trends. It can also help you reduce the fees needed to produce tax returns and financial statements.
- Assist with taxation
Accountants can help with tax-related issues in both tax planning and tax compliance. While planning helps to reduce the overall tax burden, compliance ensures you are in line with tax laws. Without an accountant to help you out with this, you can easily go against a tax law without even knowing, making it imperative to hire an accountant.
Auditing is usually needed by banks as a prerequisite of loans. Auditing has several levels that include just preparing financial statements to actually auditing where the accountant assures that the company’s financial data is accurate.
Accountant vs. Charter Professional Accountant (CPS) – Who do you need?
Essentially, accounting services involve recording and assembling transactions and generating financial statements and returns. Generating financial statements involves a higher skill level. Therefore, first, determine the work that your accountant will be handling.
Then, before you go ahead and decide to look for someone, you need to decide whether you need a CPA or an accountant. Both of them are different professionals that have different tasks and have slightly different job responsibilities.
An accountant handles the majority of the daily financial tasks of a firm. The duties include different bookkeeping tasks, including making journal entries, as well as posting account payable, payroll taxes, and receivables. Meanwhile, a CPA is responsible for auditing financial records, providing consultation, and determining the way of reporting. They have the authority to take on more responsibilities than accountants.
So, before looking at resumes, make sure you know who you want to hire.
In-house vs. outside accountant
Before we move on to how to find the ideal accountant, you need to determine if you need an in-house or an outside accountant.
While small businesses don’t have such a large volume of financial transactions that demand hiring a full-time accountant, their financial situation could benefit more from regular reviewing and planning as well as updated accounting. This is where an in-house accountant will prove to be the better choice.
Meanwhile, for any growing business, an outside accounting or a firm for consultation is best. These usually cost less than the benefits and salary of a full-time employee. Plus, you can even get a higher level of expertise by hiring an outside accountant.
An outside accountant usually takes on the following tasks:
- Analyzing or advising on how to solve accounts-related issues
- Preparing tax returns
- Making financial statements, which include the statement of cash, income statement, and balance sheet
Generally, an outside accountant will have an hourly rate, depending on the level of complexity.
As business revenue grows and as transactions start to become increasingly complicated, you can then consider hiring an in-house accountant. The fee of an outside accountant will increase with the growth in the firm’s size, making it cost-effective to hire an inside accountant.
An in-house accountant is responsible for:
- Maintaining a general ledger
- Taking care of daily transactions
- Preparing and analyzing financial statements
- Variance analysis
- Cost accounting
- Payroll management
- Managing cash and treasury including bank reconciliations
- Fixed asset accounting
What to look for when hiring an accountant?
Apart from having good knowledge of accounting principles and the best practices, an accountant should have some other qualities too. These include:
- Ability to communicate and explain the numbers
While communication skills are essential for all jobs, they are particularly essential for someone managing the finances of a company. For someone who isn’t aware of accounting terminologies and principles, understanding the nuances of accounting becomes difficult. Most accountants produce graphs and reports, but you need someone who can break down information and explain it in layman’s terms.
So, you need an accountant that can outline all the opportunities and problems to your team such that every person can understand. This way, your team can find the best course of action to make the best decision.
- Understanding your niche and business type
Not every individual well-versed in accounting is a suitable candidate. You need to look for someone who has the correct background and experience for your business.
Essentially, the ideal accountant for your business must know how your particular company works. In addition to that, they should have at least some experience working with other companies within your industry or niche so that they know the operating procedures and the common costs incurred in such a business. This will mainly be helpful when it is time for tax preparation.
Apart from the niche and industry, the stage that your company is at is also important. You should look for someone that has worked with businesses at a similar stage as yours. They should be well aware of the possible challenges and opportunities your company will have down the road so that they can be ready when the time comes and take measures that can help the company grow.
- Expertise in the latest technology
Like nearly all other professions, technology is also revolutionizing the way accounting is done. Modern software programs help accounting professionals to efficiently complete tasks. At the same time, such programs offer them a deeper insight into a clients financials.
So, the accountant you hire should now only stay updated with the latest technology in the accounting world, but he or she should also be willing to not only learn but also embrace new technology.
While many accountants have been quick to embrace recent technologies, others still favor outdated solutions. So, when you meet an accountant that you could potentially hire, ask them about the software they use and how technology is impacting their profession. You’ll know by their answer if they’re the right fit.
- Industry expertise
Apart from education and certifications, as mentioned earlier, expertise in the industry you’re working in, or experience in a similar industry is important. Some accountants work with auto dealers, some with construction contractors, meanwhile others might work with retail and non-profits. So, for instance, if you’re a construction firm, you can’t just hire an accountant that works with retail stores. So, you need to be careful when choosing someone.
The hiring process
Like with hiring any individual, you will ask your circle for referrals. Once you narrow down a list of potential candidates, you will go through the resumes to further refine the list of possible accountants you can hire. After that, the next step will be interviewing individuals. This is one of the most important steps, and during interviews, you need to find out about three main things: personality, services, and what they will charge.
The following are some questions you should definitely look into
Before you hire someone, ask yourself, is the accountant’s style similar to or compatible with yours? Secondly, evaluate the company’s compatibility and competency. Ask them how they will handle situations that might possibly come up down the road. For instance, ask them how they would handle an IRS office audit looking for the verification of automobile expenses. Once you listen to what they have to say, you will realize if you would want them to handle your business affairs.
When interviewing, you must keep in mind that an accountant can have an approach different from yours, and that can be a good thing. You only need to ensure that the accountant isn’t assertive so much so that he might pressure you into taking actions that you’re not comfortable with.
While most accountants can handle auditing and tax services, you need to question them about things like estate planning, bookkeeping, and management consulting. Will he help you to design and also implement financial information systems. Along with that, as mentioned earlier, ensure they have experience working in your industry and with a firm that is similar in size to yours. For this, you can ask questions like what they did for the firm or how they solved problems for them.
When hiring an accountant, ask them upfront what they expect to get in return for their services. If you go for an outside accountant, you will have to pay them by the hour. Before finalizing a price, get quotes from different accountants so you can determine the average. You can also ask them an estimate of the total yearly charges based on the services you will need.
However, you shouldn’t just choose someone based on the cost. Remember that an accountant charging higher will probably have more experience and will be able to work much quicker than someone charging less.
What to do next
Now that you know what you need to look for in a potential candidate, here are the next steps you should take:
- Search for accountants near you on Google or ask people around you to refer you to a good accountant they know of.
- Get in touch with at least three accountants, and schedule a complimentary consultation call with them. It’s better if you can get all the calls scheduled within a week so that you can speed up the hiring process and make efficient use of your time.
- Be sure to have your notes ready too. These notes should help you tell the accountant about your business operations, and the challenges your business faces.
- During the interviews, make sure to take notes. After all the interviews are done, compare the notes you made and the proposal of all the accountants to see which one you find the best suited for your business.
Hiring an accountant isn’t much different than hiring any other employee for your firm. The important thing to remember is to hire someone who knows your industry. To ensure they do, you can ask potential candidates for references, especially from clients within the industry you work in. You can then call the clients to ask them about how happy they were with the accountant’s fee, personality, and services. This will help you find the ideal accountant.